FIRS, in a notice of assessment dated February 24, 2009, had demanded 30 per cent of $559 million being fine payable to United States authorities in lieu of “bribes” allegedly given to Nigerian officials for operations in the country within the Halliburton group.

“Since the entire bribe would have formed part of the expenses that was charged in the tax returns of FIRS, an amount of $559 million is hereby disallowed for tax purposes.

“The relevant assessment notice for the tax arising therefrom amounting to $167,700,000 is herewith forwarded for your prompt payment,” FIRS had said in a covering letter dated February 25, 2009.

Delivering judgment yesterday, the tribunal, chaired by Kayode Sofola, SAN, who led other commissioners including Catherine Ajayi, Mustapaha Ibrahim, D. Gapsiso and Chinua Asuzu, set aside the assessment of FIRS.

It said the terms of settlement and a non-prosecution agreement between the parties exempted Halliburton from the imposition of the assessment numbered PDBA 20.

“The said assessment is defective as being speculative, a contradiction and inconsistent with the relevant tax laws.

“While foreign companies may be liable to the imposition of tax in Nigeria, in appropriate cases, Halliburton Inc USA is not chargeable to tax in Nigeria with regard to the fine it paid to the American government in the circumstances of the case,” the tribunal held.

The tribunal said for the tax to be imposed on the sum in question, the law must unambiguously impose the tax on the party sought to be charged with it.

It added: “The evidence shows that the fine was imposed for the bribery of Nigerian officials. What the quantum of the bribe was is not in evidence.

“The respondent (FIRS) speculates that the fine of $559 million or the ‘entire bribe would have formed part of the expenses that was charged in the tax returns to FIRS’. The basis for this is not clear.

“If a fine is imposed, it would be unthinkable for such fine to be claimed as an expense to be deducted in the tax returns. The purpose of the sanction, a criminal penalty, surely is a loss imposed on the party unless there is evidence to the contrary, which there is not.

“We find that the fine is not profit and to the contrary, is a loss. Thus, the case the respondent has presented before us is untenable.”

Halliburton had appealed the assessment on the grounds that it was not involved in the payment of any bribes, adding that it has never claimed any related revenue expenses or deductions in any of its tax returns to the FIRS.

The appellant said the amount of the expenses the FIRS proposed to disallow by its assessment was higher than the combined revenue from its operations in Nigeria for “the last four years.”

“The sum of $559,000,000.00 said to have been paid to the US authorities by Halliburton Inc (USA) was not representative of the amount of any alleged bribe payment,” Halliburton said, among others.